Brexit’s Winners and Losers

Foreign buyers, U.S. homeowners and the Paris market could all see gains from the British exit

Even before news of a Brexit made its way around the world, high-end brokerages and developers throughout London were already getting inquiries on behalf of foreign buyers hoping to take advantage of the tumbling pound.

The significance of the British exit from the European Union was not lost on anyone. There was an immediate financial impact, as markets took a dive, and there will certainly be many more implications in the days and weeks to come.

Here is a look at some of the predicted winners and losers in the real-estate arena.

WINNERS:

Foreign buyers of London real estate will get increased value in purchasing properties as a result of a depreciating sterling. “This will now create a short-term buying opportunity for U.S. dollar- and euro- based property investors,” said Peter Wetherell, chief executive of Wetherell, a Mayfair-based broker. “For overseas buyers, this big and dramatic drop in the value of sterling will effectively offset the Stamp Duty and tax adjustments and it will make prime London property a lucrative investment for overseas investors bold enough to take a punt despite the market uncertainty.”

U.S. homeowners could see their property values rise, as the Federal Reserve is now likely to hold off raising short-term rates. This would keep interest rates low, which would spur demand. As a result, property prices might go up as buyers are more willing to purchase at higher prices.

Well-heeled areas of London, such as Knightsbridge and Mayfair, could become even more attractive to buyers. “In a turbulent market there will be a flight to quality,” said Simon Barry, head of new developments at Harrods Estates. “High net-worth investors will only want to invest in Triple A locations.”

Paris and cities such as Frankfurt and Dublin are potential contenders to house the European bases of large banking institutions if London doesn’t remain the financial hub of the continent. If that is the case, properties in Paris will become all the more attractive. “La Defense will grow in stature, and Paris will be seen as the place to live inside the Eurozone,” Mr. Barry said.

LOSERS:

London-based property buyers will face competition from foreign purchasers in addition to dealing with the uncertainty of their own local economy. “A fall in London house prices caused by a Brexit in the long [run] will not benefit many domestic buyers, for example, if a Brexit causes – as predicted by many – wide-ranging job losses and a general slowdown in the economy,” said Martin Bikhit, Managing Director of Marylebone estate agent Kay & Co.

Neighborhoods in London dependent on the EU economy could also be impacted by an economic slowdown in the wake of the vote. “In West London and Inner North London, where there are high levels of EU buyers, there could now be a dramatic slowdown which could last for a number of years, “ said Mr. Wetherell. “The more commercial-property-dominated markets of the City of London and Canary Wharf/Docklands could be really damaged by this exit from the EU, with a flight of capital, companies, jobs and workers.”

Finally, volume house builders in the U.K. could have the odds stacked against them, Mr. Barry said, “with construction costs potentially rising by 15%, potential slowdown in economy, and stagnation in pricing.”